City financial group proposes Trenton Marriott reorganization

TRENTON — A city financial services group has come forward with its own plan to hack away at $30 million in debt for the Trenton Marriott.

LMCK Partners appeared Monday morning before the Lafayette Yard Community Development Corporation, which currently owns the city’s hotel, to suggest a plan of reorganization, a formal document for a business in financial distress.

Partner Bill Klun, who has worked as chief restructuring officer on several high profile cases, including Williams Companies and Enron, said to help the hotel comprehensively organize his group would renegotiate bond debt, restructure burdensome contracts and improve overall performance.

“Unless this place is cash flow positive, it’s going to be a wart on the city forever,” Klun warned. “This is not sustainable. If you look at the balance sheet of any similar organization, you will see something called equity, you don’t have it.”

The 197-room hotel, which opened in 2002, is plagued with approximately $30 million in debt, which includes a $13.375 million city bond, a combined $9 million in state loans and more than $7.3 million owed in a note to the Trenton Parking Authority.

Klun did not shy away from using the scary “b” word for businesses.

“It’s highly advisable to do a plan of reorganization if you’re contemplating filing,” Klun said, adding if the board doesn’t have a plan, the court will assign someone, which would ultimately be more expensive. “Bankruptcy is not a bad thing, it’s a reorganization.”

The talk of bankruptcy left some officials to hop on the defensive.

“The city has guaranteed these bonds,” said Councilwoman Marge Caldwell-Wilson, who was in attendance at the meeting.

That was immediately followed by LYCDC member John Hatch stating, “If the city doesn’t pay it, the state is going to pay it.”

“I think it’s an interesting presentation, although there are some basic assumptions that I don’t think are correct,” he said.

Klun responded that if there is a hiccup of any kind, the hotel could default into bankruptcy and the process would be accelerated by institutional bond holders.

“We think that it’s imperative that you start thinking about doing something now,” he said. “If you wait to do something later, frankly, the train would have left the station.”

Marriott is scheduled to pull out of the city’s hotel Friday at midnight.

The hotel will then run independently as Wyndham sits on the sidelines waiting to see if city council will approve a $3 million bond for renovation and transition costs. If it is approved, Wyndham would be selected as the franchise.

In the meantime, the hotel will be called the Lafayette Yard Hotel & Conference Center.

LMCK Partners CEO Taneshia Laird, who is the former Trenton Downtown Association executive director, said she called LYCDC Chairwoman Joyce Kersey after witnessing the plight of the hotel.

“The hotel is central to both business and economic development here in the city,” the Trenton resident said. “I’ve spoken to folks about this situation one of the things that I kept hearing over and over again was this need for a plan.”

The group will submit a proposal for services to the LYCDC in the coming weeks.

Kersey said Tuesday one of the ideas LMCK was proposing is already being done by the board’s attorney.

“We have an attorney that has been doing a great job in reviewing contracts,” Kersey said about Gregory Johnson.

After meeting behind closed doors Monday, Kersey said the board terminated a contract with its asset manager, David Ong of Acquest.

The chairwoman said, however, the board may still owe Ong approximately $150,000 in payments.

Ong was earning $7,500 monthly for his role as asset manager.

“We’re just trying to clean up everything,” Kersey said, noting a clause in Ong’s contract gave the board the right to terminate it.

Kersey said there are other areas LMCK could possibly be effective.

“I want them to show us what they might possibility be able to do in their consulting role that would help move us into a position where we are growing the asset more or less,” she said. “I would have to see in their plan what part of the restructuring they’re talking about and they were not explicit in that.”